Singapore’s reopening may slow but not reverse retail decline: Economists

SINGAPORE, Jun 20, 2020, BT. While retail sales in June and July will get a boost from pent-up demand flooding back into now-open shops, Singapore may not see the dramatic “revenge spending” sprees that made headlines in China, said economists, The Business Times reported.

After nearly two months, the shutters lifted at many retail outlets on Friday, in Phase Two of Singapore’s re-opening after the circuit breaker.

With almost two-thirds of the month gone, June’s retail figures are likely to still be down from a year ago, said Maybank Kim Eng economist Chua Hak Bin. But June’s contraction might be around 20 per cent, in contrast to April’s 40.5 per cent fall with shops shut for the whole month.

“There’s a good chance that retail sales may jump back close to pre-Covid levels in July, because of pent-up demand,” he said. “Items that collapsed during the circuit breaker period – wearing apparel, footwear, cars, books, jewellery – will likely rebound in July.” Generous fiscal handouts could fuel this, he added.

With dining-in allowed at food and beverage outlets, DBS analysts Alfie Yeo and Andy Sim expect consumer spending to shift from grocery retailers to food services, which are not included in the retail sales index.

UOB economist Barnabas Gan expects retail sales to pick up, particularly in July, but not to the extent of year-on-year growth.

While “not a surprise to see a little blip in across-the-board spending”, CIMB Private Banking economist Song Seng Wun too expects year-on-year growth to be down in June and July. But he refrained from specific estimates, saying that it is too early to tell how much of consumer behaviour may have been temporarily or permanently changed. “Much will depend on labour market conditions in the coming months,” he added.

While high-rollers in China went on sprees in luxury boutiques to make up for lost time, that may not happen here, he added, noting that things were “relatively quiet” at The Shoppes at Marina Bay Sands on Friday, which have initially reopened for loyalty programme members only.

“Luxury retail is mainly dependent on tourism,” said Mr Gan. “With very little tourism spending at the moment and domestic consumers likely to stay cautious amid the economic slowdown and increased unemployment for the rest of the year, luxury retail may not see a significant boost despite Phase Two of the reopening.”

Safe distancing requirements caused queues at malls and mass market retailers on Friday. On social media, luxury boutiques suggested that customers make appointments, with slots available into the coming months. Cartier said its appointments “are looking healthy”, with good attendance on Friday.

Vehicle sales could provide a boost in coming months, said economists. Dealerships also encouraged appointments, with BMW dealer Performance Motors extending its showroom operating hours for this weekend.

A Cycle & Carriage spokesman said their showrooms saw “healthy interest and traffic” on Friday. At the reopened Porsche Centre Singapore, “response from customers has been robust”, said Jason Lim, general manager of Stuttgart Auto, Porsche’s sole dealer in Singapore.

Mazda general manager William Low noted pent-up demand for test drives, with appointments made ahead of the re-opening. “These customers had been waiting eagerly for our showrooms to resume operations so that they can finalise their car purchase after their test drive.”

Mazda’s two showrooms reopened on Friday with a promotion in which customers pay only monthly interest for 12 months, deferring the principal amount to the next year, which Mazda expects to “generate even more interest and enquiries”.

The news that Certificate of Entitlement bidding will resume on July 6 has also fuelled requests for test-drive opportunities, he added.